Which Mortgage

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In your endless search to find the lowest mortgage rates on the planet, you may be wondering which route will lead to the biggest savings.

Should you go to your local bank, try your luck with an online mortgage lender, visit a credit union, or consult with an independent mortgage broker/banker?

You’ve Got a Lot of Options When It Comes to a Mortgage

  • There are many avenues you can take to obtain a home loan
  • Including local brick-and-mortar banks and credit unions you may already know and work with
  • Or direct mortgage lenders (both online and offline) you may have never heard of that promise low rates
  • Lastly don’t forget to consider an independent mortgage broker as well

You may have heard that mortgage brokers offer the lowest interest rates thanks to their wholesale partners.

And as we all know (or should know), wholesale prices tend to be cheaper than retail prices, the latter of which rise as operating costs are passed along.

So does this mean brokers will automatically offer better rates than the competition?

To be blunt, there’s no easy answer here. Actually, there is, but it’s not without its legwork.

I’d argue to call/visit all of the above to see who offers the best interest rate and closing cost combination.

Yes, I know it’s a pain, but if you don’t do it, you’ll never really know what could have been. And consider the return on your investment for those few extra hours you put in.

Of course, you’ll need to be firm with each company you call, as they’ll be selling you as hard as humanly possible, and making promises to best everyone else, whether true or not.

Assuming you survive the endless sales pitches, you’ll need to determine if the company offering the “best deal” can be trusted to actually get the deal done. After all, a mortgage offer is of no value if it doesn’t actually close.

This requires doing some research on the company and/or individual involved, asking for references, and so forth.

Oh, and going over the rate and cost of the loan more than once to ensure everyone is on the same page.

That’s right, not every mortgage company is reputable, and if you pick one that can’t deliver, you’ll waste a lot of time and potentially miss your window to snag a low interest rate.

Again, it sounds like a lot of work, but if you consider the money involved (potential savings every month for the next 30 years), it’s really not a whole lot of effort.

Extreme couponers who spend hours saving a few bucks, I’m looking in your direction…

A Mortgage Broker Might Be Able to Offer a Shortcut

  • There’s one little shortcut you can take to make the mortgage shopping part easier
  • If you use a mortgage broker they can compare rates from multiple lenders on your behalf
  • They have lots of wholesale lending partners at their disposal which can save you time and money
  • This is actually a key part of their job – to find you the lowest rate possible from their many partners

One “shortcut” you can take is by consulting with a mortgage broker, who act as middlemen between wholesale banks/lenders and the borrower.

Instead of calling 25 different retail banks to inquire about rates, costs, turn times, eligibility and so on, you can ask a mortgage broker to do all of that for you.

A mortgage broker is basically your own personal shopper, and they will have access to loan programs from numerous banks and lenders.

They’re kind of like independent insurance agents, who can get quotes from a bunch of different insurers, without you having to fill out a quote form 100 times.

Similarly, brokers simply gather your information once and then determine which mortgage lender they work with will offer you the best rate, based on your unique loan scenario.

After THEY shop around, they’ll come back to you with their best rate in the hopes of earning your business.

And if you tell them that a retail bank is offering something lower, you may hear an even better deal out of their mouth.

[Are mortgage rates negotiable?]

Can Mortgage Brokers Get You a Better Rate?

mortgage broker rates

  • This is a difficult question to answer universally because many factors are at play
  • It depends on the wholesale lender(s) the broker does business with
  • If these lenders offer low rates and the broker doesn’t take a large commission
  • They may offer an unbeatable deal, but still always shop around and negotiate!

At any given moment, retail banks and direct lenders may offer lower or higher mortgage rates than brokers and independent mortgage bankers.

They may not always be lower, and they may not always be higher, which is why you should consider all avenues before deciding on any one company or individual.

In some cases, your loan scenario may not be attractive to the bank offering the lowest rates for one reason or another. Simply put, your loan may not fit their product niche.

And some retail banks just offer higher rates than others because mortgages aren’t their strong suit, or only business, so if you happen to be with that more expensive bank, a broker may have a better rate for you.

If this is the case, knowing who does “like” your type of loan is paramount. With a broker/banker, you don’t need to search around to find that “right” bank. They’ll do it for you.

So it is possible to get a better deal with a broker/banker, depending on the circumstances.

Why Do Some Brokers Have Better Mortgage Rates Than Others?

  • Mortgage rates can vary among brokers just like they do with retail lenders
  • This is because they work with various wholesale lenders and may select different compensation packages that can affect the rate you receive
  • Be sure to shop and compare individual brokers just like you would banks
  • Some may charge more than others and/or not be approved with the banks offering the lowest rates

As noted, mortgage brokers work with lots of different lender partners, which means interest rates can vary from lender to lender. This partially has to do with their compensation.

Say one broker decides to get paid 2% on all the loans they originate with a certain bank, while another only charges 1% with that same bank.

That could result in an interest rate of say 3.125% versus 2.875% on the same loan thanks to the difference in commission.

If you only speak to the broker charging 2%, you won’t know that another broker out there can do better because they’re willing to earn less per loan.

The same may be true of the lenders they’re partnered up with. For example, one broker may work with a low-cost lender that the other doesn’t happen to work with.

So while a broker has the ability to shop your rate with multiple lenders, you might want to shop with multiple mortgage brokers to see what’s out there.

You may discover that one broker can beat another broker’s pricing thanks to the lenders they work with and/or their compensation levels.

Lastly, be sure to compare multiple brokers/bankers as well to weed out the bad players.

And as alluded to earlier, a good deal is only worth its salt if it actually funds.

If a broker/banker can get a tricky deal done for you, there’s a lot of value there, even if the rate is slightly higher.

If a big bank drags their feet and isn’t able to get it done in a reasonable amount of time (or at all), their seemingly better deal essentially becomes worthless.

Read more: What mortgage rate can I expect to receive?

Source: thetruthaboutmortgage.com

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Purchase mortgage rates dropped after climbing for two consecutive weeks, reflecting declining consumer confidence and an emerging “technical recession,” amid a higher interest rate environment.

Purchase mortgage rates declined this week to average 5.30%, down from last week’s 5.54%, according to the latest PMMS survey from Freddie Mac. A year ago this time, rates averaged 2.80% The index compiles rates reported by lenders during the past three days.   

“Purchase demand continues to tumble as the cumulative impact of higher rates, elevated home prices … and declining consumer confidence take a toll on homebuyers,” said Sam Khater, chief economist at Freddie Mac. 

The Fed raised interest rates by 75 bps Wednesday, marking its fourth rate hike this year. While interest rates do not dictate mortgage rates, higher rates make a range of lending more expensive.

The long-term bond market, off which mortgage rates typically are based, has mostly priced-in all future actions by the Fed, and may have already peaked with the 10-year Treasury shooting up to 3.5% in mid-June, said Lawrence Yun, chief economist for the National Association of Realtors. 

Mortgage rates tend to align with the 10-year U.S Treasury yield, which declined 26 basis points in one week to 2.78% Wednesday. 

Gross domestic product, a wide-ranging measure of economic activity, fell by 0.9% in the second quarter, marking the second decline. A total of two consecutive quarters of negative economic growth translates to a recession.

Weakening economic outlook, high inflation and affordability challenges have taken a toll on buyer demand. 

According to the Mortgage Bankers Association (MBA), the market composite index, a measure of mortgage loan application volume, hit the lowest in two decades for the week ending July 22. The refinance index dipped 3.7% from the previous week, and the purchase index decreased 0.77%.

“It’s clear that over the past two years, the combination of the pandemic, record low mortgage rates and the opportunity to work remotely spurred greater demand. Now, as the market adjusts to a higher rate environment, we are seeing a period of deflated sales activity until the market normalizes,” said Khater.

Sales of newly built homes fell more than 8% in June from the prior month and were 17% lower than June 2021, according to the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau. Existing home sales slid 5% in June from the previous month and declined 14% from June 2021, the National Association of Realtors said.

On HousingWire’s Mortgage Rates Center, Black Knight’s Optimal Blue OBMMI pricing engine, measured the 30-year conforming mortgage rate at 5.596% Wednesday, down from 5.789% the previous week. 

The 30-year fixed-rate jumbo was at 5.165% Wednesday, down from 5.245% the week prior, according to the Black Knight index. 

According to Freddie Mac, the 15-year fixed-rate purchase mortgage averaged 4.58% with an average of 0.8 point, down from last week’s 4.75%. The 15-year fixed-rate mortgage averaged 2.10% a year ago. 

The 5-year ARM averaged 4.29% this week, down from 4.31% the previous week. The product averaged 2.45% a year ago. 

Source: housingwire.com

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Today we’ll take a look at the top mortgage lenders in Alabama, based on their most recent year’s loan volume.

This is a list of the largest mortgage lenders in the state, not necessarily the top-rated ones (though those two things can coexist).

Despite being a less populated state, more than 800 lenders still managed to fund more than $51 billion in home loans there.

But like the other 49 states, one company managed to beat out the competition, and by a wide margin at that.

Read on to see which companies topped the list in the state of Alabama last year.

Top Mortgage Lenders in Alabama (Overall)

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $3.0 billion
2. Pennymac $2.0 billion
3. Regions Bank $2.0 billion
4. Freedom Mortgage $1.5 billion
5. Fairway Independent $1.5 billion
6. Wells Fargo $1.5 billion
7. Trustmark $1.3 billion
8. UWM $1.2 billion
9. Renasant Bank $1.2 billion
10. Homepoint $1.1 billion

If you had to guess which mortgage company did the most lending in Alabama, you’d probably guess right.

That’s because the nation’s top mortgage lender overall was also the biggest lender in Bama. Yes, I’m talking about Rocket Mortgage, which funded $3 billion, according to HMDA data from Richey May.

That was 150% more than their closest competitor, Pennymac, which came in second with $2 billion.

Birmingham, Alabama-based Regions Bank snagged third with a similar $2 billion, a positive development for local mortgage companies.

In fourth was Freedom Mortgage with $1.5 billion, followed by Fairway Independent Mortgage with a comparable total.

The bottom half of the top 10 included San Francisco-based Wells Fargo, Trustmark National Bank, United Wholesale Mortgage, Renasant Bank, and Homepoint.

Trustmark is headquartered in nearby Jackson, Mississippi, while Renasant Bank is located in Tupelo, MS.

So just one of the top 10 mortgage companies in the state of Alabama is homegrown.

Top Alabama Mortgage Lenders (for Home Buyers)

Ranking Company Name 2021 Loan Volume
1. Pennymac $1.2 billion
2. Fairway Independent $1.1 billion
3. Regions Bank $901 million
4. Trustmark $828 million
5. FirstBank $765 million
6. Renasant Bank $660 million
7. Rocket Mortgage $614 million
8. Wells Fargo $598 million
9. UWM $588 million
10. Homepoint $542 million

The picture changes quite a bit when we look only at home purchase lending. Then Pennymac takes the top spot with $1.2 billion funded.

In second was Wisconsin-based Fairway Independent with $1.1 billion, followed by Regions Bank with $901 million.

The next three spots all went to banks, including Trustmark, FirstBank, and Renasant Bank.

That makes sense since home buyers often turn to brick-and-mortar institutions or companies they already do business with.

The rest of the top 10 included Rocket Mortgage, Wells Fargo, UWM, and Homepoint.

Top Refinance Lenders in Alabama (for Existing Homeowners)

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $2.3 billion
2. Freedom Mortgage $1.3 billion
3. Regions Bank $911 million
4. Wells Fargo $829 million
5. Pennymac $828 million
6. loanDepot $662 million
7. Mr. Cooper $641 million
8. UWM $615 million
9. Homepoint $562 million
10. Renasant Bank $511 million

When we filter out the purchase loans and focus on mortgage refinances, Rocket Mortgage easily takes the top spot with $2.3 billion funded.

That was a full billion more than second place Freedom Mortgage, and much more than Region Bank’s $911 million.

Two other heavyweights rounded out the top five, including Wells Fargo and Pennymac.

And spots six through 10 went to loanDepot, Mr. Cooper, UWM, Homepoint, and Renasant Bank.

No real surprises, and only one Alabama-based company in the list.

Top Mortgage Lenders in Birmingham

Ranking Company Name 2021 Loan Volume
1. Regions Bank $942 million
2. Rocket Mortgage $770 million
3. Fairway Independent $587 million
4. Wells Fargo $424 million
5. Pennymac $399 million
6. Renasant Bank $387 million
7. UWM $371 million
8. Freedom Mortgage $341 million
9. Mr. Cooper $303 million
10. Citizens Bank $289 million

Top Mortgage Lenders in Huntsville

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $518 million
2. Redstone FCU $407 million
3. FirstBank $394 million
4. Pennymac $388 million
5. Freedom Mortgage $342 million
6. loanDepot $335 million
7. Wells Fargo $310 million
8. UWM $234 million
9. Homepoint $207 million
10. Hometown Lenders $197 million

Who Are the Best Alabama Mortgage Lenders?

If we consider customer reviews as opposed to total loan volume, we might be able to determine the best vs. top lenders in the state.

Of course, reviews are subjective and there are many review websites out there. But I typically check out Zillow to see which lenders are faring the best in each state.

Turns out Birmingham-based SouthPoint Bank has the best rating, a 4.99 out of a possible 5 from about 170 reviews.

Not far off is fellow Birmingham-based lender MortgageRight with a 4.97/5 from roughly 550 reviews, a much higher total.

Meanwhile, Tuscaloosa-based First Federal Bank has a 4.97/5 rating from nearly 200 reviews.

Those big names on the list also have Zillow ratings, including Rocket’s 4.48/5 , Pennymac’s 4.40/5, Freedom Mortgage’s 4.85/5, and Fairway Independent Mortgage’s 4.95/5.

Take the time to consider lenders both big and small, and nationwide or local to find the right fit for your home loan needs.

You may also want to speak to a mortgage broker or two, who can shop your loan with multiple companies at once.

(photo: formulanone)

Source: thetruthaboutmortgage.com

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It’s time to check out the top mortgage lenders in Georgia based on their 2021 loan volume.

These mortgage companies outranked more than one thousand other lenders to take the top honors.

Overall, about $160 billion in home loans was funded in The Peach State last year, making it one of the bigger states volume-wise nationwide.

And taking the #1 spot was Rocket Mortgage, also the nation’s largest mortgage lender.

Read on to see which other companies ranked in the top 10.

Top Mortgage Lenders in Georgia (Overall)

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $12.2 billion
2. Pennymac $6.6 billion
3. Wells Fargo $5.3 billion
4. Truist $4.7 billion
5. UWM $4.7 billion
6. Ameris Bank $4.0 billion
7. Newrez $3.9 billion
8. Freedom Mortgage $3.8 billion
9. AmeriHome Mortgage $3.5 billion
10. Fairway Independent $3.1 billion

Detroit-based Rocket Mortgage, the nation’s biggest mortgage lender, originated an impressive $12.2 billion in home loans in Georgia last year.

That was nearly double their nearest competitor, Pennymac, per HMDA data from advisory company Richey May.

SoCal based Pennymac funded about $6.6 billion in the state last year, and only about a third of it came via the retail channel.

They mostly dole out loans via the correspondent lending channel (via smaller banks and credit unions), and through mortgage brokers in the wholesale channel.

In other words, your loan may have been originated by a different company, but backed by Pennymac.

In third was San Francisco-based Wells Fargo with $5.3 billion funded, another good showing despite their controversies.

They were followed closely by Truist Financial and United Wholesale Mortgage (UWM), both with about $4.7 billion funded.

In sixth was Atlanta, Georgia’s own Ameris Bank with a healthy $4 billion in home loan volume.

Newrez was a close seventh with $3.9 billion, followed by Freedom Mortgage, AmeriHome, and Fairway Independent Mortgage.

Top Mortgage Lenders in Georgia (for Home Buyers)

Ranking Company Name 2021 Loan Volume
1. Pennymac $3.5 billion
2. Rocket Mortgage $2.6 billion
3. Ameris Bank $2.4 billion
4. UWM $2.3 billion
5. Homestar Financial $2.2 billion
6. Truist $2.1 billion
7. Fairway Independent $2.1 billion
8. Wells Fargo $1.9 billion
9. Newrez $1.9 billion
10. AmeriHome Mortgage $1.9 billion

If we consider only home purchase lending, the list changes quite a bit and new names surface.

Pennymac was the #1 home purchase lender in Georgia with $3.5 billion funded, followed by Rocket Mortgage with $2.6 billion.

Ameris Bank took third with $2.4 billion, meaning about 60% of their total mortgage business is home purchase loans.

In fourth was UWM with $2.3 billion, followed by Gainesville, GA-direct lender Homestar Financial with $2.2 billion in origination volume.

Others in the top 10 included Truist Financial, Fairway Independent, Wells Fargo, Newrez, and AmeriHome.

Top Refinance Lenders in Georgia (for Existing Homeowners)

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $9.5 billion
2. Freedom Mortgage $3.3 billion
3. Pennymac $3.1 billion
4. Wells Fargo $3.1 billion
5. UWM $2.4 billion
6. Truist $2.2 billion
7. loanDepot $2.2 billion
8. Mr. Cooper $2.0 billion
9. Newrez $2.0 billion
10. Better Mortgage $1.8 billion

Now let’s talk about the biggest refinance lenders in Georgia. As expected, Rocket Mortgage absolutely dominated with $9.5 billion funded.

That was nearly triple second place Freedom Mortgage’s $3.3 billion, a testament to how active they are in the state.

In third was Pennymac with $3.1 billion, followed closely by Wells Fargo with roughly the same amount funded.

In fifth was UWM with $2.4 billion, a strong showing since they only work with mortgage brokers via the wholesale channel.

The rest of the top 10 included Truist Financial, loanDepot, Mr. Cooper, Newrez, and struggling lender Better Mortgage.

Top Mortgage Lenders in Atlanta

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $8.7 billion
2. Pennymac $4.2 billion
3. Wells Fargo $4.0 billion
4. UWM $3.7 billion
5. Truist $3.7 billion
6. Ameris Bank $3.1 billion
7. Newrez $3.1 billion
8. AmeriHome Mortgage $2.6 billion
9. Freedom Mortgage $2.4 billion
10. loanDepot $2.4 billion

Top Mortgage Lenders in Augusta

Ranking Company Name 2021 Loan Volume
1. Rocket Mortgage $432 million
2. Pennymac $429 million
3. Queensborough National $326 million
4. Freedom Mortgage $249 million
5. Veterans United $233 million
6. Centerstate Bank $230 million
7. Wells Fargo $227 million
8. Truist $221 million
9. New American Funding $214 million
10. U.S. Bank $180 million

Who Are Georgia’s Best Mortgage Lenders?

I typically head over to Zillow and check customer reviews to determine which mortgage companies are faring best in a particular state.

Here’s what I found for Georgia. Atlanta-based AmeriSave has a 4.68/5 rating from over 2,400 reviews. Not the best rating, but the most reviews by far.

Then there’s Atlanta’s Silverton Mortgage, which has a superior 4.94/5 rating from about 1,200 reviews.

Even better is Ameris Bank’s 4.95/5 rating from nearly 900 customer reviews, and fellow Atlanta lender First Option Mortgage’s 4.97/5 from about 1,000 reviews.

Honorable mention goes to Capital City Home Loans and its 4.96/5 score from 300 reviews.

As for the big, national brands, Rocket has a 4.48/5, Pennymac a 4.4/5, and Wells Fargo a 4.95/5.

So it appears there are plenty of solid options, whether you use a local, Georgia-based mortgage lender or a national brand.

Also be sure to check out some local mortgage brokers to see what they can offer.

(photo: sailn1)

Source: thetruthaboutmortgage.com

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adjustable

The Federal Reserve today approved an interim rule that will require mortgage lenders to disclose examples of how a mortgage loan’s interest rate and monthly payment may change.

This is pretty important seeing that monthly payments may become unaffordable if interest rates rise significantly from the time the loan is taken out to the month of the first adjustment.

ARM Warnings Will Be the Norm

  • Because ARMs were a major driver of the housing crisis
  • The Fed wanted to make sure new protections were in place
  • To ensure borrowers are aware of what they’re getting into
  • Of course it still requires borrowers to actually read their paperwork!

Beginning on October 1, 2011, banks and mortgage lenders must alert borrowers to the risk of payment increases before they agree to take out mortgage loans with variable rates or terms, otherwise known as adjustable-rate mortgages.

They will be required to include a payment summary in the form of a table, including the initial rate, maximum rate that can occur in the first five years, and the “worst case” rate possible over the life of the loan, along with corresponding monthly mortgage payments.

Pay Attention to Your Projected Payments

projected payments

As you can see from the sample table above, a $4,000 monthly payment could turn into a nearly $6,000 payment over time, assuming the borrower kept the loan, and projections hold true.

You can find this information on your Loan Estimate (LE) or Closing Disclosure (CD) if you’re taking out an ARM and curious what may happen to the monthly payment.

Just keep in mind that these are estimates and may not actually materialize. As mentioned, a lot of borrowers sell their homes or refinance their mortgages before the loans actually adjust.

“This interim rule clarifies that creditors’ disclosure should reflect the first rate adjustment for a “5/1 ARM” loan because the new rate typically becomes effective within 5 years after the first regular payment due date,” the Fed said in a release.

“Today’s interim rule also corrects the requirements for interest-only loans to clarify that creditors’ disclosures should show the earliest date the consumer’s interest rate can change rather than the due date for making the first payment under the new rate.”

Additionally, it clarifies which mortgage types are covered by the special disclosure requirements, including loans with minimum payment options that cause the loan balance to increase, such as teaser rates and negative amortization loans.

Of course, the impact of this rule will probably be minimal, given the fact that it’ll end up somewhere in a pile of paperwork given to borrowers at loan origination.

That, along with the fact adjustable-rate mortgages only account for about five percent of market share these days now that fixed mortgages have taken center stage.

Source: thetruthaboutmortgage.com

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The mortgage landscape has changed a ton over the past several years.

Mortgage lending guidelines have firmed tremendously since the housing crisis took hold, and mortgage rates have fallen to new all-time lows.

Meanwhile, home prices seem to have bottomed, and decent home price appreciation is in the forecast.

This has created an interesting environment for both prospective and existing homeowners.

Determining Your Homeownership Horizon

  • When to buy real estate and take out a mortgage
  • You need to determine how long you plan to keep the property
  • And in that same sense, the home loan that goes along with it
  • As it will dictate loan choice, paying points, and more

Perhaps one of the biggest changes in thought is that those who take out a mortgage today will keep it for as long as they own their home.

In the past, this wasn’t the case, with mortgage rates very high, and then in a downward trend for many years since.

That allowed existing homeowners to refinance and tap home equity via cash out refinances and HELOCs, while also reducing monthly mortgage payments.

Even recent homeowners were able to refinance just six months or a year after purchasing their homes, thanks to the precipitous drop in interest rates.

[The refinance rule of thumb.]

But that march downward seems to have come to an end, and could in fact reverse course, which will equate to slower prepayment speeds and far fewer refinances.

After all, no one will be keen to lose your super low mortgage rate, even if they do need cash.

It also makes the question of which mortgage to get more difficult. Additionally, one really has to question whether they should buy down their mortgage rate.

Why Homeowners Sell Their Homes

why homeowners sell

People sell their homes for all types of reasons, and many do so well before their mortgages ever reach maturity.

The most common reason all homeowners move is to obtain a better home, this according to data from the 2017 American Housing Survey (AHS).

It’s also pretty normal to sell a home in order to buy in a better neighborhood, or for a first-time buyer to sell in order to form a household (think more space).

Other reasons include being closer to family, shortening a commute, relocating for a job, reducing housing costs, being forced to move, or simply because of a change in household.

You should consider all these reasons before you decide on a particular type of home loan. It might sway your decision.

Most People Keep Their Homes for Six to 10 Years

housing tenure

  • Prior to the housing crisis the median tenure was around six years
  • Meaning millions of homeowners took out 30-year loans
  • But kept them for a fraction of the time
  • Nowadays tenure is climbing as homeowners hunker down

Take a look at this chart from the National Association of Realtors Profile of Home Buyers and Sellers.

The median tenure for a home seller over the past two decades has been just six years. I guess forever homes are a thing of the past.

As you can see, tenure increased after the mortgage crisis, mainly because underwater mortgagors had no choice but to wait it out.

But many of those who persevered have now listed their homes, just as they are getting their heads above water.

The point I’m trying to make is that very few mortgages are actually held to term, or anywhere close to it.

For one reason or another, mortgages just don’t last that long, despite many being 30-year fixed mortgages.

When looking at this chart, one could reasonably wonder why more homeowners don’t take out short-term adjustable-rate mortgages, such as 5/1 or 7/1 ARMs. The savings would massive.

Both offer lower mortgage rates than their fixed-rate cousins, which would result in a lower monthly payment, less interest paid, and more principal accrued.

Yet most homeowners seem reluctant to go with an ARM, perhaps because it’s difficult to predict the future.

[30-year fixed vs. adjustable-rate mortgage]

Still, the numbers don’t lie – scores of homeowners are on the move in just six short years, whether they hold 30-year fixed mortgages or whatever else.

Will You Keep Your House Longer Now?

  • As you can see from the graph above homeowners are staying put longer
  • Thanks to lower interest rates and high home prices
  • The latest data says homeowners are sticking around for about 10 years on average
  • So that may affect your mortgage decision too

As I noted, the landscape has changed quite a bit. So will the same trend hold true going forward, or will more homeowners choose to stay put for longer?

I’m sure the average homeowner tenure will increase somewhat, but probably not by that many years. There will still be tons of homeowners that sell in a short period of time for a bevy of reasons.

And so homeowners will continue to take out long-term fixed mortgages that don’t do them much good, aside from the peace of mind of knowing their rate won’t change.

More recent data suggests an average holding period of about a decade.

Sure, it’s slightly longer, but since most mortgages come with terms of 30 years, it should still make you question why you’d pay to lock in a rate for triple the time necessary.

Of course, rates on fixed mortgages and ARMs aren’t all that different at the moment, so it’s not a terrible mistake to make, if you can even refer to it a mistake.

Still, you might be able to save some big bucks if you go with a 10/1 ARM as opposed to a 30-year fixed over the course of 120 months, not to mention build equity a bit faster.

Where Homeowners Stay the Longest

  1. El Paso, TX (99 months)
  2. Albuquerque, NM (98 months)
  3. Oxnard, CA (97 months)
  4. Greensboro, NC (97 months)
  5. Philadelphia, PA (96 months)
  6. Cleveland, OH (95 months)
  7. Seattle, WA (94 months)
  8. Baltimore, MD (93 months)
  9. Rochester, NY (93 months)
  10. Jacksonville, FL (92 months)

In the cities listed above, tenure is the longest, per updated data from NAR for 2018. In El Paso, Texas, a full 99 months go by between sales on the average home there.

While it sounds like a long time, it’s still just over eight years. A 7/1 ARM would cover most folks there, and even if the rate adjusted higher for one year once it became adjustable, the savings realized during the first seven years would likely eclipse any payment increase.

Where Homeowners Stay the Shortest

  1. Providence, RI (33 months)
  2. Cape Coral, FL (35 months)
  3. Greenville, SC (36 months)
  4. New Orleans, LA (44 months)
  5. Madison, WI (47 months)
  6. Grand Rapids (51 months)
  7. Knoxville, TN (54 months)
  8. Boston (57 months)
  9. Omaha, NE (66 months)
  10. Augusta, GA (66 months)

As you can see, lots of homeowners in the cities above could benefit from the short-term financing afforded with an ARM. In most cases, a 5/1 ARM would mean a fixed rate during their entire stay.

What’s even more worrisome is that some homeowners are paying to refinance, or paying mortgage points at closing to obtain a lower rate.

Unfortunately, many of these homeowners won’t hold their mortgages long enough to benefit from the future savings. So use a refinance calculator if you’re thinking about doing this.

After all, the trend to sell in 10 years or less is one that will be hard to shake, even in light of the unprecedented situation we find ourselves in today.

Still, you should definitely ponder the fact that the mortgage rate you receive today will likely be the lowest you’ll ever have – that may sway your decision to part with it so soon.

Read more: Are mortgage points worth it?

(photo: robstephaustralia)

Source: thetruthaboutmortgage.com

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Aly Yale

Posted on: February 2, 2022

Choosing the right VA lender is incredibly important. Not only does it impact your VA home loan experience but it also influences your costs.

Are you trying to decide between VA home loan lenders? Here’s how to choose the best one.

Get matched with a mortgage lender. Start here (Apr 29th, 2023)

How to find the best VA mortgage lender 

Who is the best VA home loan lender? There’s no clear-cut answer to that one. All lenders offer different rates, fees, and levels of service, and their qualifying standards can vary, too. To find the best one for your unique scenario, you’ll need to:

#1. Prepare for your mortgage application

Before you can begin applying for VA loans, you need to set the stage first. This means saving up for your down payment (if any), getting your credit and budget in order, and avoiding big financial changes in the months before applying for a mortgage (jobs, income, new credit cards, etc.).

You should also begin gathering up all the documentation you’ll need for your loan. This includes your Certificate of Eligibility (COE), your bank statements, and your tax returns.

#2. Set your budget

Your next step is to prep your budget. Before you can begin the loan process, you need to have a good idea of what you can spend each month on your mortgage payment. Keep in mind your mortgage will also include things like homeowners insurance, property taxes, and HOA dues, if necessary. 

You can use our VA loan calculator to get a good idea of what you might be able to comfortably spend on a house.

#3. Familiarize yourself with your mortgage options

You already know you want a VA loan, but there are actually several types of VA mortgages to choose from. It’s helpful to know what type of mortgage you want before you start shopping.

For example, if you’re a Native American veteran and are buying on certain federal lands, you’d use the VA’s NADL program. If you’re refinancing, you could opt for a VA cash-out refinance or VA Streamline Refinance (also sometimes known as an Interest Rate Reduction Refinance Loan (IRRRL)). 

The VA has a full breakdown of these loan options on its website.

Determining which VA mortgage program you want to use will help narrow down your choice of VA lenders since not all companies offer the full suite of VA loans. 

#4. Compare rates and terms from at least 3-5 lenders

Next, it’s time to get quotes from at least three VA home mortgage lenders. This requires providing a little basic information — your income, credit score, and other details — but they usually take only a day or two to receive. 

Once you have estimates from each lender, compare them line by line. How do the closing costs and fees measure up? What about the interest rate? You should also factor in the level of service and responsiveness you’ve received thus far.

#5. Get pre-approved

When you’ve chosen the best VA home loan lender for you, it’s time to get pre-approved for your loan. This essentially means the lender has evaluated your financial details and thinks you’re a good candidate for a loan.

To get your pre-approval, you’ll fill out a short application with the lender. Once they’ve gone over it, you’ll get a pre-approval letter stating how much you can borrow and at what interest rate. You’ll include this in any offers you make to show you’re serious about the home.

#6. Read the fine print

Finally, make sure you understand your loan’s fine print. You should have a good grasp on all your loan’s terms before you sign, including:

  • What is your closing date?
  • Does your rate lock extend through the expected closing date?
  • How much money do you need to bring to closing?
  • What will your monthly payment be and how will you pay it?

If you have any questions or are unsure about something, ask your loan officer before heading to the closing table.

Get a personalized mortgage quote. Start here (Apr 29th, 2023)

Why you should shop around for a mortgage lender

Shopping around for your veteran mortgage lender is incredibly important, especially if you want to minimize your costs as a buyer. According to Freddie Mac, getting quotes from just five lenders can save you as much as $3,000 over the life of the loan.

Some of these savings come from fees and other closing costs. Much of it comes from interest rate discrepancies.

Here’s an example: Say you were quoted a 3% rate on a 30-year, $200,000 loan with Lender A and a 3.25% rate on that same loan with Lender B. It doesn’t seem like much, but Lender A would actually save you $27 per month and a whopping $10,000 in interest over the next three decades.

How to compare mortgage loan offers 

To compare your loan offers, you’ll want to look at the loan estimate — a three-page document given to you by the lender. These forms break down all the costs, fees and other financial details of your loan. These loan estimates are standardized, so comparing them line by line is quite simple.

You’ll want to pay particular attention to the loan amount, the interest rate, the estimated monthly payment, and your estimated closing costs. The “Comparisons” section on page 3 can be helpful, too. It shows what your balance will be in five years and can be a good way to compare loan option costs.

Questions to ask your mortgage lender

Before you decide which VA loan lender to go with, make sure you ask them some questions. 

You’ll want to know things like:

  • How long do you expect the process to take? Some lenders take longer to process loans than others, so be sure and get an estimate before moving forward. You’ll need to know an estimated closing date when making offers and negotiating with sellers. (It will likely play a role in which offer they choose, too). 
  • Who will be my main point of contact throughout the process? You’re going to have a lot of questions along the way, and you need a go-to person. You’ll also want to ask how you can get in touch with this person. Are they available via phone, email, or text? And during what hours?
  • Which parts of the process will be online and which will be in-person? Most lenders will let you do everything remotely and online these days, but it still helps to ask. How will the logistics of your loan work? Where will you sign the closing papers? Get all the details.

You might also ask how often the lender does VA loans. These mortgages can be more complicated than other types of loans, so you want one who’s experienced and well-versed in the process.

Start comparing mortgage lenders today (Apr 29th, 2023)

Benefits of a VA loan

VA loans come with countless benefits, but the biggest perk is that they require no down payment.

Because these mortgages are guaranteed by the U.S. Department of Veterans Affairs, lenders can afford to pass substantial benefits along to VA borrowers.

Unlike other mortgage programs, which ask for anywhere from 3% to 20% down, VA loans require no down payment at all. This can offer significant savings right off the bat. (A low-cost FHA loan requires at least $7,000 down on a $200,000 house, for example, while a VA loan requires $0 down).

Some of the VA loan benefits include:

  • Competitively low interest rates
  • No credit score requirements
  • Limits on closing costs
  • Loans are assumable, meaning future buyers can take over the loan (and the favorable rate and terms it comes with)
  • No private mortgage insurance (PMI)
  • No loan limits
  • Can be used multiple times

VA loan mortgage rates 2023

When compared to other loan types — conventional loans and FHA loans, for example — VA home loans offer consistently lower rates than loans for the average consumer.

  VA Conventional FHA
December 2021 2.99% 3.38% 3.39%
November 2021 2.95% 3.32% 3.32%
October 2021 2.88% 3.22% 3.22%
September 2021 2.85% 3.17% 3.20%
August 2021 2.88% 3.19% 3.23%
July 2021 2.94% 3.27% 3.27%

Source: Ellie Mae Origination Insight Report, June 2021

A lower interest rate translates to a lower monthly mortgage payment and substantial savings over the life of your loan.

VA Home Loan Lender FAQ 

Do all lenders provide VA loans?

No. Only approved lenders can offer VA loans, so you’ll need to be choosy about which mortgage company you work with. That said, most major lenders are authorized to originate VA loans. 

Who is the best lender to get a VA loan from?

That really depends on your financial situation, where you’re buying, your budget, and the level of service you want. A great place to start is our best VA home loan lenders guide.

Who is eligible for a VA home loan?

VA loans are only for active-duty military members, veterans, and their families (including surviving spouses), so there are strict service requirements you’ll need to meet to qualify.

The VA doesn’t set specific financial standards for its loans, though private lenders — the companies who actually issue the loans — do. These vary from one lender to the next, but in most cases, borrowers need at least a 620 credit score and a debt-to-income ratio of 41% or less.

If you fall short of these requirements, you still might qualify. Just make sure to shop around for your lender, work on improving your credit, and consider making a down payment.

What is the VA funding fee?

To get a VA home loan, you’ll need to pay the VA funding fee. This is a one-time cost at closing which helps the VA maintain the VA home loan program and continue to offer valuable home loan products to military homebuyers. The VA funding fee can be financed into your total loan amount and paid down over time.

The amount of the VA funding fee depends on your loan type, the nature of your military service, the number of times you’ve used your VA loan benefit and the amount of your down payment.

What is the minimum credit score for a VA loan?

The VA doesn’t have a minimum credit score for these mortgages, but individual lenders do. These minimums vary and are usually around 620 or 640.

What is a VA direct loan?

This is a loan issued directly by the VA (meaning the VA is the lender). They’re only available for Native American veterans buying or refinancing in certain areas of the country. 

What is the max loan amount for a VA loan?

There are no maximum loan amounts for VA mortgages. While there is a cap on how much you can borrow without making a down payment, the loan program technically has no limits.

What is the lowest VA mortgage rate ever?

The lowest VA rates have typically been in the low 2% range. You’ll get lower rates on shorter loan terms (so, 15-year loans typically have lower rates than 30-year ones). Higher credit scores will also help you qualify for lower interest rates.

Can I use a VA loan to buy a second home?

You cannot use the VA loan for a second home or investment property. The VA home loan program is intended to help military service members become homeowners and is specifically meant for the purchase of a primary residence.

Do different lenders offer different rates on VA home loans?

Yes. All mortgage lenders offer slightly different rates and fees. Your rate will also depend on your creditworthiness and the size of your down payment (if any). 

Which lenders offer VA home loans for people with bad credit?

There aren’t any bad credit VA home loan lenders per se, but every VA lender sets its own credit score minimums. This is why it’s so important to shop around — especially if you have a low credit score. Generally speaking, most lenders require a score of at least 620 or 640. If your score is below this, you can often make up for it with a larger down payment or by having more in cash reserves.

How do I decide which lender to use?

You’ll want to compare the loan estimates, factor in the service and responsiveness you’re receiving, and look at online reviews and ratings. Not all lenders are created equal, nor will they come with comparable pricing.

VA home loan lenders: The bottom line

Because the Department of Veterans Affairs guarantees VA loans, lenders can offer substantial benefits to veterans, active-duty service members and their families. The VA home loan program includes some of the best mortgage products on the market.

Get a personalized mortgage quote. Start here (Apr 29th, 2023)

Source: militaryvaloan.com

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